1943: United States

Economic Survey.

As in 1942 economic activity in 1943 was largely centered on war production. The Federal Reserve index for industrial production, based on 1935-39 output of 100, rose from 227 in January 1943 to 245 in October. This was over 130 per cent higher than in 1939. Expenditures for war material increased from $52,000,000,000 in 1942 to $82,000,000,000 in 1943. Government expenditures of war material reached a new high of $7,800,000,000 in November. By the end of the year 70 per cent of the nation's productive facilities were concentrated on war materials. National income for the year was estimated at $140,000,000,000, some $21,000,000,000 above that of 1942. Of this amount farm income amounted to $20,000,000,000, which was more than double that of 1939. As a whole, America produced 50 per cent more munitions in 1943 than in 1942, and 5 per cent more foodstuffs than the all-time record yield of the previous year.

Steel, the key industry in war production, established new output records for the fourth consecutive year. Steel-ingot production approximated 89,000,000 tons as against 86,000,000 for 1942. This record was established despite a decline of 35,000 workers. Ingot and casting facilities were operated at better than 99 per cent of capacity.

To keep steel and other industries running, the production of coal also set new records. Reliable estimates put the year's production of bituminous coal at not less than 583,000,000 tons and anthracite at 57,000,000 tons. Both figures were only slightly above the 1942 record, but they were achieved despite four strikes, abnormal absenteeism and loss of men to the armed forces.

Although the electric power industry received no Army-Navy E banners, no industry has met the needs of war more adequately. Meeting an increased demand since 1939 of 75 per cent, the industry stepped up its production from 125,000,000,000 kilowatt hours in 1939 to 221,000,000,000 in 1943. This required an addition of 11,000,000 kilowatts of generating capacity, of which the Federal government supplied 3,000,000, municipalities 500,000 and privately owned companies 7,500,000. Despite fear of a shortage when the war began, the industry reached the end of 1943 without the necessity of rationing or other restrictions. Barring severe drought or reduction of the coal supply, the industry predicted no power shortage in 1944.

The new high records established by steel, coal and electric power were also true of most other industries engaged directly or indirectly in war production. Crude oil production in the United States reached a new record of 1,500,000,000 barrels, 115,000,000 barrels more than in 1942. At the end of the year production was approximately 4,400,000 barrels daily or at the rate of 1,600,000,000 yearly. Producers of natural and manufactured gas reported an increase during the year of 1.9 per cent for customers and 11.6 per cent of the cubic feet sold. More than half of the cubic feet was consumed by industry. Rubber manufacturers reported at the end of the year a rubber production of 45,000 tons a month and predicted that the 800,000-ton goal for synthetic rubber would be reached during 1944. Rubber production, it was predicted, would reach an all-time high in 1944, and this despite civilian restrictions.

One of the greatest victories of the war was the efficiency of the railroads in meeting the increased demands. Although the purchase of materials and equipment fell below the two previous years, the freight handled was 725,000,000,000 ton miles, 14 per cent higher than in 1942 and 80 per cent above the war year 1918. Increase in passenger business was even more spectacular. The 85,000,000,000 passenger miles of 1943 was 58 per cent over 1942. This was done with but 26,433 new freight cars, 656 new locomotives and but slight addition to passenger equipment in the first eleven months of the year. Increased service combined with inadequate replacements, and labor scarcity, however, was beginning to have its effect in an increased number of wrecks. At the end of the year a Senate committee warned the War Production Board that only a generous supply of new equipment would prevent a critical transportation breakdown in 1944. Highway motor truck transportation increased its volume 10 per cent, although few new trucks were available and registrations declined by over 640,000.

The records in production of raw materials, finished products and those made by the transportation and communication facilities were accomplished despite labor shortages reported by almost all industries. At the end of the year these shortages were becoming particularly acute in transportation. Although several million men and ten of thousands of women were drawn into the Army and Navy during the year, the labor force was raised to about 65,000,000. The addition of 3,000,000 women since the war started helped to make this possible.

Shortages in civilian goods were expected during the war and continued in most items. Notable in this respect was a 38.5 per cent drop in building permits from the figures of 1942. Sufficient raw materials for war production, however, were supplied in almost all cases. It was assumed at the beginning of the war that there would be a shortage of war metals as long as the conflict lasted. At the end of 1943, however, the reserve stocks of aluminum, copper, zinc and other metals had reached a point where their allocation for civilian use was actually being made in limited quantities.

Foreign trade during 1943 broke all previous records, with exports aggregating $10,378,000,000 for the first ten months. Like other aspects of the nation's economic life it was dominated by artificial wartime influences. Approximately 80 per cent of the exports were on Lend-Lease accounts. Facilities for the export trade were far better in 1943 than in the previous year owing to the increased tonnage of American-built ships and the great reduction in the submarine menace.

Although the production of civilian goods had declined by at least 25 per cent since 1940, retail sales in dollar values were over 10 per cent higher in 1943 than in 1942. Not only were sales larger but net after taxes was also larger. This result was obtained despite rationing in some commodities, such as shoes, and the virtual disappearance of many durable goods items. This is explained in part by the fact that the incomes of many workers had advanced, often more rapidly than the cost of living.

According to a report issued Jan. 1, 1944, by the Bureau of Labor Statistics of the Department of Labor, the cost of living rose but 3½ per cent in 1943 as compared with 9 per cent in 1942, 10 per cent in 1941 and 1 per cent in 1940.

Finance.

War developments continued to dominate American banking. The money supply of the nation (bank deposits and money in circulation) approached $120,000,000,000 at the end of the year as against a prewar level of $60,000,000,000. Currency in actual circulation at the end of the year was about $20,000,000,000, an increase of $5,000,000,000 over the preceding year. As a result of war financing, commercial banks of the country expanded their government securities holdings to more than $62,500,000,000 at the end of November compared with $15,700,000,000 on June 30, 1939.

Swollen deposits, intensified activity, large investments in government securities and handsome profits not only characterized commercial banks, but savings banks as well. Reversing a ten-year trend during which savings banks failed to attract substantial new funds the first nine months in New York state alone showed an increase in thrift deposits of over $300,000,000 compared with a decline of $155,000,000 in the corresponding 1942 period. Total savings banks' deposits for the United States gained $718,454,000 in the first nine months of 1943. At the conclusion of the third war-loan drive in September all mutual savings banks had invested almost $6,000,000,000 in Treasury obligations, or more than 46 per cent of their assets and about 52.5 per cent of deposits.

Estimates of total net savings during the year by individuals run from $30,000,000,000 to $40,000,000,000. The probable figure is around $36,000,000,000, at least $9,000,000,000 over 1942. Most of this money went into government bonds. The second war loan drive in April which sought to raise $13,000,000,000 was oversubscribed by $2,500,000,000.

The intense business activity of the nation was reflected in the stock exchanges. The volume of stock trading on the New York Stock Exchange, after declining in the preceding six years, increased from 125,677,963 in 1942 to 278,741,765 shares in 1943. The former had been the largest turnover since 1938. Bond trading, amounting to $3,254,716,525, was the heaviest since 1936.

Measured by The New York Times' averages of 50 stocks, the market advanced from the low point of the year of 82.3, on Jan. 8 to a high of 102.01 on July 15, the best level since May, 1940. The averages declined to 88.70 on Nov. 30, but moved up to 92.48 on Dec. 31, a gain of 10.18 for the year. The most active trading during the year was in low-priced secondary issues and in rails, some of which doubled in value.

Although profits of manufacturing companies were considerably reduced by higher operating costs and higher taxes, final results were better than for 1942. A survey of 287 manufacturing companies showed that their net income for the first nine months of 1943 exceeded that of the similar period by 12 per cent. On a before-tax basis, however, earnings set a new high record. One estimate put corporate profits, after taxes, at $8,400,000,000 in 1943 as against $7,376,000,000 in 1942. In general these increased profits were not handed on to the stockholders. A few corporations declared extra dividends but in most cases they preferred to increase reserves as a protection against the necessity of conversion to peacetime production.

In brief, 1943 was a year of intense economic activity concentrated on war production. Industrial products, national income, total income of wages and salaries, savings, corporation profits and many other results of economic activity reached an all-time high. From the economic aspect, 1943 was believed to represent the climax of war activity. As business leaders and economists looked forward to 1944, they expected a leveling off of wartime production, an increase in manufacturing for civilian needs, and a more complicated labor problem with unemployment appearing again. Demobilization of the economic war effort, it was expected, would begin in 1944.

SEVENTY-EIGHTH CONGRESS

President's Message.

The first session of the Seventy-Eighth Congress convened on Jan. 6 and adjourned Dec. 31. The day after it met, President Roosevelt delivered in person his 'state of the union' message. He predicted the year 1943 would bring substantial advances toward victory over the Axis and outlined a postwar world in which Americans would have governmental assurance of freedom from want 'from the cradle to the grave' and that the United Nations would enjoy freedom from fear through the permanent disarmament of their enemies. The President noted the 'miracle' of production on the home front and the more significant victories on the war front. The message, however, lacked specific legislative recommendations.

Budget and Appropriations.

Four days later, the President sent a record-breaking $108,903,047,923 budget to Congress, of which $100,000,000,000 was for war costs during the fiscal year 1944. He asked for an increase in Federal receipts of $16,000,000,000 annually by the imposition of higher taxes, compulsory savings, or both. He predicted a deficit of $71,047,679,923 and a national debt of $210,549,150,549 by the end of January 1944, under present tax laws. He pointed out that the existing national debt limitation of $125,000,000,000 would have to be raised very soon.

Although the Democrats were in theoretical control of both houses of Congress, Congressional action in practice was shaped by a coalition of Republican and anti-New Deal Democrats. In the House the Democrats lost four seats during the session, finishing with 218, a bare majority of a total membership of 435. Congress had been in session but a short time before it was clearly evident that in general both parties would cooperate with the President on the war effort, but on other legislation act independently of executive control.

Unofficial estimates at the time of adjournment put the total approved appropriations at $114,592,000,000, including a record $71,000,000,000 for the War Department. To meet the cost of war, Congress, at the request of the administration, increased the debt limit to $210,000,000,000.

Most of the appropriations were made before Congress adjourned for its summer recess on July 5.

The appropriations for the Army and Navy passed during this session were the largest ever passed by any nation in the history of the world. In addition to the $27,637,226,198 in direct appropriations to the Navy there was approximately $6,000,000,000 voted in contractual authority, the major item being approximately $5,000,000,000 to provide for 27,000 planes for the Navy. Total appropriations for the Navy were thus over $33,000,000,000. On June 18, the War Department asked Congress for the astounding appropriation for the year beginning July 1 of $71,510,438,873 which they described as the 'decisive' and peak Army appropriation. This amount was authorized with but slight changes. Since the appropriations authorized by the bill included $12,472,839,200 previously appropriated but not spent, the actual new appropriations were but slightly over $59,000,000,000.

Taxation.